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Commercial Mortgages

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Lawdit Solicitors - Expert Author

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23 September 2009

You may need to take out a commercial mortgage to buy premises to start or expand a business, or if you are buying a business that is directly linked to property, for example a hotel or retail outlet. Mortgages are usually for 15 years or more and the property itself is at risk if payments are not made on time.

Most banks and building societies offer commercial mortgages, but their criteria must be satisfied. Most lenders require a positive personal credit rating and clear evidence that your business is creditworthy, although some lenders may accept applications where there is an adverse credit history.

Most lenders will apply a loan to value ratio and will expect you to invest a proportion of your own money in the purchase. The more you are willing to invest of your own money, the greater the chance you will have of securing a loan for the remainder.

The ratio is the loan amount divided by the current market value of the property expressed as a percentage. So if a property has a current value of &pound200,000 and a loan is required for &pound150,000, the loan to value ratio is 75 per cent.

The lender's decision will also depend on your current business circumstances. A commercial lender will expect your business to be stable and profitable. They may ask to see your business plan and longer term financial projections to assure themselves that your business has the ability to make repayments on the loan. Some lenders may impose restrictions on the uses of commercial premises for example the ability to sublet to other businesses and certain business concerns may be excluded altogether.

It is important to consider carefully all the terms of any lending agreement, particularly as the loan period may be for 15 years or more. This is a complex area and it is essential to seek specialist legal advice.

By Jane Coyle (jane.coyle@lawdit.co.uk).


About the Author

Lawdit Solicitors offer services and advice for litigation, commercial contracts, Intellectual Property and IT legal agreements. We are experts in commercial law with a heavy emphasis on Intellectual Property, Internet and e-commerce law. Lawdit is a member of the International Trademark Association, the Solicitors' Association of Higher Court Advocates and we are the appointed Solicitors to the largest webdesign association in the world, the United Kingdom Website Designers Association.



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Article Published/Sorted/Amended on Scopulus 2009-09-30 12:37:51 in Legal Articles

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